What Happens to Student Loans When You Die?
What happens to student loans when you die depends on the type of loan you have. Those with a federal student loan don’t need to worry — your loan balance will be discharged (or wiped away) upon death. However, if you pass away with a private student loan, your cosigner or spouse may still be on the hook.
Learn more about what happens to student loans if you die to better protect your family and estate.
On this page:
What happens to federal student loans when you die?
If you die and have a federal student loan, no one will be responsible for your debt —not your parents, your spouse or anyone else. The servicer will discharge your loan, or a Parent PLUS loan taken in your name, once they are provided with documentation of the death. The converse is also true — if your parent(s) die with a Parent PLUS loan, that debt should also be discharged and not passed on to you.
What happens to private student loans when you die?
Do student loans “die with you” if you borrowed from a private lender? Well, it depends. Although many banks, credit unions and online lenders offer a death discharge, not all do. If your lender doesn’t offer a death discharge, it can collect your student debt from your estate.
Before signing on the dotted line, ask your lender what happens to your student loans if or when you die. You might also consider speaking with a student loan counselor.
Does my cosigner have to pay my student loan debt if I die?
What happens to student loan debt when you die if you have a cosigner? Many private student loan servicers will hold your cosigner responsible for your debt if you die — this is typically true with all types of private loans.
In fact, cosigned debt repayment may be accelerated if you or the cosigner dies. For some lenders, this will make the balance due immediately, and could trigger a default if you don’t have the funds to retire the loan.
How can I protect my cosigner?
If you’re worried about saddling a cosigner with your student loan debt after you die, you may want to explore the following options:
- Cosigner release: You may be able to take your cosigner off of your loan completely. Usually, lenders require you to make on-time payments for a specified period of time to prove you are financially capable before they allow cosigner release. However, not all lenders offer this option.
- Student loan refinancing: If you have private student loan debt with a lender that doesn’t offer a cosigner release, refinancing could be a solution. Refinancing is a process that pays off your old loans and issues you a new loan in its place. Through refinancing, you could remove your cosigner in a couple of different ways:
- Qualifying on your own, which means you are no longer required to have a cosigner
- Applying alongside a cosigner (the same or different one) but only with lenders that have clear-cut cosigner release policies that would allow you to send your “guarantor” on their way as soon as possible
Check out our guide on how to refinance student loans for more information.
- Purchasing life insurance: If you purchase enough coverage to pay off the balance of your student loan, a life insurance policy could provide financial protection for your cosigner after you die. It’s worth noting that life insurance can be complicated, so you might want to speak with a financial advisor or insurance professional.
Frequently asked questions
If you live in a community property state — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin — your spouse could be liable for your private student loan debt after you die.
Things work a little differently in other states. Here, your spouse would only be responsible if they were the cosigner on your private student loan or if you were joint borrowers on a spousal consolidation loan. Remember, though — if your private lender does not offer a death discharge, it could still collect your debt through your estate.
If you are handling an estate for a loved one who died with a student loan, first you’ll need to contact the loan servicer to report the borrower’s death. During the call, the loan servicer will discuss your options, which may or may not include a death discharge. The servicer will also almost certainly require you to provide proof of the borrower’s death.
Thanks to the Tax Cuts and Jobs Act of 2017, taxes are not required on a student loan discharged due to death. Previously, some parents were stuck with heavy tax bills due to discharged student loans.